Real Estate Professional Indemnity Insurance

Information verified correct on October 24th, 2016

Find Professional Indemnity Insurance for Real Estate Agents

Running a business of any kind exposes you to a diverse range of risks. If you are a professional who provides expert services and advice to clients, you are at risk of being sued should you breach your professional duty.

If your actions in a professional capacity result in a client suffering a financial loss, that client may be entitled to seek compensation. The client may make allegations of malpractice or professional misconduct on your part, which can lead to lengthy and costly legal battles.

However, professional indemnity insurance is designed to provide cover against such lawsuits. If claims that you have breached your professional duty, a professional indemnity policy provides cover for the cost of your legal defence. It also covers any settlement costs or damages you are required to pay as a result.

Professional indemnity insurance is a vital form of cover for many professionals, including real estate agents, and it offers the necessary financial protection to help your business survive any claims of professional negligence.

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What are the Risks of Not Having Real Estate Professional Indemnity Insurance?

Professional indemnity insurance provides cover for professionals who offer their expert advice and services to their clients, which is why this type of insurance is suitable for real estate agents perfectly. Real estate agents advise their customers on everything from property prices to selling tactics and how to negotiate with buyers.

Professional indemnity insurance policies offer cover for a whole host of risks relevant to real estate agents, including:

  • the non-disclosure or the misrepresentation of important property details
  • errors in documentation relating to property purchases
  • underquoting
  • failing to follow auction rules and laws
  • property management failures and issues
  • fraud and dishonesty
  • wrongful or inadequate advice to clients
  • loss of client documentation
  • libel, slander or defamation.

Without any cover in place, real estate agents could find themselves at risk of facing potentially costly lawsuits. However, professional indemnity insurance is specially designed to provide cover against claims you have breached your professional duty, and it offers essential financial protection for many businesses.

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Why is Professional Indemnity Insurance Necessary Among Real Estate Professionals?

Professional indemnity insurance is a must-have for real estate professionals. In the real estate game, agents are regularly exposed to a range of risks that could see them become the subject of a lawsuit. Customers could choose to take you to court because of a breach of contract, breach of duty of care or the breach of various laws. In other cases, customers may allege that you have failed to manage a rental property properly, or that you have misrepresented the details of a certain property.

Even if you don’t believe it’s likely that you’ll end up embroiled in legal action, it’s always best to err on the side of caution. No matter how thorough and professional you are about your work, mistakes can and do happen. All it takes is one unhappy customer and you could find yourself in financial trouble.

Legal action can be quite costly. Professional indemnity insurance provides cover for the costs of your defence, including investigation and court costs, as well as for any damages or compensation you are legally required to pay.

Depending on your industry, it may be compulsory for you to have professional indemnity cover. For example, a minimum of $1 million of professional indemnity insurance is compulsory for real estate agents in New South Wales.

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Professional Indemnity Insurance Claims

Under a professional indemnity insurance policy, it’s important to notify your insurer as soon as you’re made aware of a claim made against you. This could be in the form of a written demand from a client or solicitor, or simply a verbal complaint or request for compensation. If you become aware of circumstances that could lead to a claim, it’s essential that you inform your insurance provider of this as soon as possible.

“Claims Made” Professional Indemnity Cover

Professional indemnity insurance policies are offered on a ‘claims made’ basis. What this means is that the policy provides the protection you need is the one that is in force when a claim is made against you, not when you actually provided the professional services related to the claim.

As an example of this, you may have closed an important sale in 2011, but you were not notified of a claim relating to that sale until 2014. You’ve changed insurance providers in the interim period. The insurance policy that will provide coverage is the one that’s in effect in 2014.

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What are the Benefits of Getting Cover Through a Broker?

Just like when you’re looking for many other types of insurance cover, you’ll need to decide whether you want to purchase professional indemnity cover direct from an insurer or through a broker. For the majority of businesses, the best approach to take is to utilise the services and expertise of a broker.

The reason behind this is that it’s the job of a broker to work in your best interests to help you find the right insurance cover. Brokers have a wealth of experience at matching their clients with the right insurance policies, and they have an in-depth knowledge and understanding of how professional indemnity insurance works.

A good broker will take the time to get to understand your business and determine what your insurance needs are. Once that has been completed, they will provide you with a number of suitable policy options. A broker can help you weigh up the pros and cons of competing policies, as well as help you understand any of the technical jargon or exclusions applicable to the policy.

If you try to arrange insurance yourself rather than through a broker, you run the risk of getting the wrong cover. As a result, there’s a chance of ending up either under-insured, which can lead to a very nasty surprise down the line, or over-insured — paying for cover you don’t need.

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FAQs About Real Estate Professional Indemnity Insurance

Q. Do I really need professional indemnity insurance?

  • A. Yes. This is an essential form of cover for real estate agents, providing much-needed financial protection against a whole range of possible lawsuits. In some areas of Australia, a certain level of professional indemnity cover is actually mandatory for real estate professionals.

Q. What is run off cover?

  • A. As this type of insurance is offered on a ‘claims made’ basis, you can find yourself the subject of a lawsuit well after you have retired and still need to have a level of cover in place. Run off cover ensures you are protected even when you are no longer working.

Q. What else can I do to protect my business?

  • A. Consider developing a risk management plan to minimise your exposure to any potential risks. Perhaps this could mean evaluating your property management procedures and structures, or looking at implementing a higher level of professional training for all employees.

Professional indemnity insurance is a crucial form of cover for real estate agents, providing important financial protection against a host of unique risks. However, in order to ensure you end up with the right policy for your needs, compare your options and seek advice from an experienced insurance broker.

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